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Hallenstein Glasson Holdings ltd || 2013 annual report

2

FINANCIAL HIGHLIGHTSNZIFRS$000 2013 2012 2011 2010 2009

financial HiGHliGHts

Sales 220,117 215,581 205,485 207,139 198,197Profit after tax 18,669 21,020 18,283 19,581 12,803Net cash flows from operating activities 21,818 29,229 14,560 31,015 23,111

financial statistics

Total equity 66,935 66,564 63,021 62,064 56,100Total assets 85,308 88,578 85,449 83,641 78,289Profit as % of average shareholders' funds 27.97% 32.44% 29.23% 33.14% 22.45%Profit per ordinary share 31.30c 35.24c 30.65c 32.83c 21.46cRatio current assets to current liabilities 2.40:1 2.23:1 2.17:1 2.34:1 1.92:1

diVidend (cents Per sHare)

Interim paid April 16.00 14.50 14.00 14.00 10.00Final declared payable December 17.50 19.00 17.00 17.00 11.00

33.50 33.50 31.00 31.00 21.00

Ordinary dividend cover 0.93 1.05 0.99 1.06 1.02Net tangible assets per share (cents) 112.22c 111.59c 105.65c 103.06c 93.10c% shareholders' funds to total assets 78.46% 75.15% 73.75% 74.20% 71.66%


4

CHAIR mAN’S REpORT

tHe directors adVise tHat tHe audited net Profit after tax for tHe 12 montHs to 1 auGust 2013 Was $18.669 million, a decrease of -11.18% oVer tHe corresPondinG Period last year ($21.020 million). GrouP sales for tHe Period Were $220.117 million, an increase of 2.10% oVer tHe corresPondinG Period last year ($215.581 million).total group comprehensive income for the period was $20.055 million (2012: $22.259 million). includedin comprehensive income is a gain of $1.179 million on revaluation of the group’s property portfolio.

Whilst performance in the first half of the year was satisfactory, results for the winter season have been disappointing.

both hallensteins and storm brands performed to expectations, but glassons in both new Zealand and

CHAIR mAN’S REpORTAustralia have felt the full brunt of a record mild winter and aggressive discounting in the womenswear marketplace during the past six months.

notwithstanding a decline in profit, the balance sheet remains strong. stock levels are comparable with the previous year and cash reserves stand at $19.312 million. the group remains debt free.

SEGMENTRESULTSHallensteinBrotherssales for the year increased 5.33% and net profit after tax improved 17.71%.

hallensteins continued to redefine its position in the market and has made excellent progress in a challenging market. during the period three non strategic stores were closed:

- Pakuranga in march 2013- newmarket in July 2013- masterton in July 2013

Stormsales for the year increased 24.06% (same store 19%) and net profit after tax improved 17.23%. since balance date storm has opened its first store in Australia in chapel street melbourne.

GlassonsNewZealandsales for the year were -3.14% on the prior year, with the winter season proving to be a difficult challenge. reduced margin resulted in a decline in profit of -21.77% for the full year.

GlassonsAustraliasales for the year (in Australian dollars) increased 6.45%, with same store sales -5.53%. reduced margin saw profit decline to a loss after tax in nZd of -$1.161 million. included in that loss is a pre tax amount of nZd 500,000 incurred for store relocation and restructuring. during the year we opened a further three stores:

- chermside (brisbane) in september 2012- moorabbin (melbourne) in march 2013- homebush (sydney) in July 2013

We also closed in miranda (sydney) in July 2013 due to mall refurbishment. since balance date we have closed a non contributing store at geelong.

ECOMMERCEsales on the internet have continued to grow and will continue to be a key focus for each brand. continued investment is being made in this part of the business in both technology and people.

DIVIDENDthe directors have resolved that a final dividend of 17.5 cents per share will be paid on 6th december 2013 to shareholders on the company’s register as at 5:00pm 29th november 2013. together with the interim dividend of 16 cents per share paid 19th April 2013 the dividend for the full year is 33.5 cents per share, unchanged from last year. future dividend will be dependent on group trading performance and capital expenditure requirements.

FUTUREOUTLOOKthe first seven weeks of the new year have been difficult with group sales down on last year -9%. While this period does not have a significant impact on earnings for the future period, it does demonstrate how competitive the environment is at present.

most of this decline is being felt in womenswear, with hallensteins continuing to show solid performance. during october this year both hallensteins and glassons are relocating into new premises in lambton Quay, Wellington. these stores will be the largest footprints for each brand and represent strong brand statements for the future. during september, hallensteins announced a partnership with ekocycle (a collaboration with global music artist will.i.am and the coca-cola company). through this partnership hallensteins will be introducing a collection of men’s suits as its latest sustainable product offering, under hallenstein brothers’ tailored suit label, h brothers.

this collaboration is the first step in exposing hallensteins to a wider global market. Whilst longer term benefits are anticipated it may take some time for this partnership to deliver meaningful financial results.

Warren bell chairman of directors 25 september 2013


6

INDEpENDENT AUDITORS’ REpORTTO THE SHAREHOLDERS OF HALLENSTEIN GLASSON HOLDINGS LImITED

rePort on tHe financial statementsWe have audited the financial statements of Hallenstein Glasson Holdings Limited (“the Company”) on pages 7 to 32, which comprise the statements of financial position as at 1 August 2013, the statements of comprehensive income and statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 1 August 2013 or from time to time during the financial year.

directors’ resPonsiBility for tHe financial statementsThe Directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

auditors’ resPonsiBilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company and the Group’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

We have no relationship with or interests in the Company or any of its subsidiaries other than in our capacity as auditors and providers of taxation services. These services have not impaired our independence as auditors of the Company and the Group.

oPinionIn our opinion, the financial statements on pages 7 to 32:

(i) comply with generally accepted accounting practice in New Zealand; and

(ii) comply with International Financial Reporting Standards; and

(iii) give a true and fair view of the financial position of the Company and the Group as at 1 August 2013, their financial performance and cash flows for the year then ended.

rePort on otHer leGal and reGulatory requirementsWe also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 1 August 2013:

(i) we have obtained all the information and explanations that we have required; and

(i) in our opinion, proper accounting records have been kept by the Company and the Group as far as appears from an examination of those records.

restriction on distriBution or useThis report is made solely to the Company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

Chartered Accountants

Auckland

25 September 2013

CONSOLIDATED STATEmENTS OF COmpREHENSIvE INCOmE /// FOR THE YEAR ENDED 1 AUGUST 2013

GrouP Parent

$’000 note 2013 2012 2013 2012

Sales revenue 3 220,117 215,581 – –Cost of sales 3 (89,059) (89,193) – –Gross profit 131,058 126,388 – –

Other operating income 5 155 167 – –Insurance income and gains/(losses) relating to Christchurch earthquake 26 – 1,949 – –

Selling expenses (80,236) (75,909) – –Distribution expenses (6,905) (6,602) – –Administration expenses (19,001) (17,559) (762) (652)Total expenses (106,142) (100,070) (762) (652)

Operating profit/(loss) 25,071 28,434 (762) (652)Finance income 3,5 910 867 44 27Intercompany charges 25 – – 718 625Dividends from subsidiary companies 25 – – 20,877 18,789Profit before income tax 25,981 29,301 20,877 18,789

Income tax 6 (7,312) (8,281) – –

Net surplus attributable to the shareholders of the Holding Company 3 18,669 21,020 20,877 18,789

Other comprehensive income

Gains (net of tax) on revaluation of land and buildings 1,179 – – –Fair value gain (net of tax) in cash flow hedge reserve 126 1,012 – –Increase in share option reserve 81 227 – –

Total comprehensive income for the year attributable to the shareholders of the Holding Company 20,055 22,259 20,877 18,789

Earnings per share

Basic earnings per share 18 31.30 35.24 Diluted earnings per share 18 31.30 35.24

The Notes to the Accounts form an integral part of and are to be read in conjunction with these financial statements.


8

STATEmENTS OF FINANCIAL pOSITION /// AS AT 1 AUGUST 2013

GrouP Parent

$’000 note 2013 2012 2013 2012

equityContributed equity 15 28,498 27,672 28,498 27,672Asset revaluation reserve 11,811 10,632 – –Cashflow hedge reserve 140 14 – –Share option reserve 87 325 – –Retained earnings 26,399 27,921 7,977 7,610Total equity 66,935 66,564 36,475 35,282

Represented by

current assetsCash and cash equivalents 7 19,312 25,970 (132) 148Trade and other receivables 8 1,138 864 – –Advances to employees 544 – 544 –Due from subsidiaries 8,25 – – 1,742 814Derivative financial instruments 4 195 19 – –Prepayments 8 2,669 2,760 – –Inventories 9 20,224 19,514 – –Total current assets 44,082 49,127 2,154 962

non-current assetsInvestments in subsidiaries 24 – – 34,354 34,354Property, plant and equipment 22 40,209 38,125 – –Intangible assets 23 597 734 – –Deferred tax 13 420 592 – –Total non-current assets 41,226 39,451 34,354 34,354

Total assets 85,308 88,578 36,508 35,316

current liaBilitiesTrade payables 10 6,836 6,632 33 34Employee benefits 11 3,081 2,743 – –Other payables 10 7,302 9,439 – –Taxation payable 12 1,154 3,200 – –Total current liabilities 18,373 22,014 33 34

Total liabilities 18,373 22,014 33 34

Net assets 66,935 66,564 36,475 35,282

thenotestotheaccountsformanintegralpartofandaretobereadinconjunctionwiththesefinancialstatements.

thefinancialstatementsaresignedforandonbehalfoftheBoardandwereauthorisedforissueon25september2013.

wJBell gJpopplewell

director director

25setember2013 25september2013

STATEmENTS OF CHANGES IN EQUITY /// FOR THE YEAR ENDED 1 AUGUST 2013


Parent $’000 note

sHare caPital

treasury stock

asset reValuation

reserVe

casH floW HedGe

reserVe

sHare oPtion

reserVeretained

earninGs total equityBalance at 2 August 2011 29,279 (1,680) – – – 7,610 35,209comPreHensiVe incomeProfit for year – – – – – 18,789 –Total comprehensive income – – – – – 18,789 18,789transactions WitH oWnersPurchase of treasury stock 15,16 – (99) – – – – –Sale of treasury stock – - – – – – –Dividends 15,17 – 172 – – – (18,789) –Gain/loss on sale of treasury stock transferred to retained earnings – – – – – – –Total transactions with owners – 73 – – – (18,789) (18,716)Balance at 1 August 2012 29,279 (1,607) – – – 7,610 35,282comPreHensiVe incomeProfit for year – – – – – 20,877 –Total comprehensive income – – – – – 20,877 20,877transactions WitH oWnersPurchase of treasury stock 15,16 – (699) – – – – –Sale of treasury stock 15,16 – 953 – – – – –Dividends 15,17 – 164 – – – (20,877) –Transfer to employee advances 15,16 – 775 – – – – –Gain/loss on sale of treasury stock transferred to retained earnings 15 – (367) – – – 367 –Total transactions with owners – 826 – – – (20,510) (19,684)Balance at 1 August 2013 29,279 (781) – – – 7,977 36,475

GrouP $’000 note

sHare caPital

treasury stock

asset reValuation

reserVe

casH floW HedGe

reserVe

sHare oPtion

reserVeretained

earninGs total equityBalance at 2 August 2011 29,279 (1,680) 10,632 (998) 190 25,598 63,021comPreHensiVe incomeProfit for year – – – – – 21,020 –Revaluation net of tax – – – – – – –Cash flow hedges net of tax – – – 1,012 – – –Increase in share option reserve – – – – 227 – –Total comprehensive income – – – 1,012 227 21,020 22,259transactions WitH oWnersPurchase of treasury stock 15,16 – (99) – – – – –Sale of treasury stock – – – – – – –Dividends 15,17 – 172 – – – (18,789) –Transfer of share option reserve to retained earnings – – – – (92) 92 –Gain/loss on sale of treasury stock transferred to retained earnings – – – – – – –Total transactions with owners – 73 – – (92) (18,697) (18,716)Balance at 1 August 2012 29,279 (1,607) 10,632 14 325 27,921 66,564comPreHensiVe incomeProfit for year – – – – – 18,669 –Revaluation net of tax – – 1,179 – – – –Cash flow hedges net of tax – – – 126 – – –Increase in share option reserve – – – – 81 – –Total comprehensive income – – 1,179 126 81 18,669 20,055transactions WitH oWnersPurchase of treasury stock 15,16 – (699) – – – – –Sale of treasury stock 15,16 – 953 – – – – –Dividends 15,17 – 164 – – – (20,877) –Transfer to employee advances 15,16 – 775 – – – – –Transfer of share option reserve to retained earnings – – – – (319) 319 –Gain/loss on sale of treasury stock transferred to retained earnings 15 – (367) – – – 367 –Total transactions with owners – 826 – – (319) (20,191) (19,684)Balance at 1 August 2013 29,279 (781) 11,811 140 87 26,399 66,935


10

GrouP Parent$’000 note 2013 2012 2013 2012

casH floWs from oPeratinG actiVitiesCash was provided from:Sales to customers 219,876 215,722 – –Rent received 155 167 – –Interest from short term advances 822 738 44 27Other interest 54 64 – –Insurance proceeds for business interruption – 3,038 – –Dividends received – – 20,877 18,789Intercompany charges – – 718 625

220,907 219,729 21,639 19,441Cash was applied to:Payments to suppliers 148,353 143,385 763 654Payments to employees 41,204 39,077 – –Interest paid – – – –Taxation paid 12 9,532 8,038 – –

199,089 190,500 763 654Net cash flows from/(applied to) operating activities 21,818 29,229 20,876 18,787

casH floWs from inVestinG actiVitiesCash was provided from:Proceeds from sale of property, plant and equipment and intangible assets 22,23 199 93 – –Insurance proceeds for material damage – 2,507 – –Repayment of employee advances 230 – 230 –Loan repayment from subsidiaries – – – –

429 2,600 230 –Cash was applied to:Purchase of property, plant and equipment and intangible assets 22,23 8,446 10,137 – –Loan to subsidiaries – – 927 372

8,446 10,137 927 372Net cash flows from/(applied to) investing activities (8,017) (7,537) (697) (372)

casH floWs from financinG actiVitiesCash was provided from:Sale of treasury stock and dividends 15,16 1,117 172 1,117 172

1,117 172 1,117 172Cash was applied to:Dividend paid 17 20,877 18,789 20,877 18,789Purchase of treasury stock 15,16 699 99 699 99

21,576 18,888 21,576 18,888Net cash flows from/(applied to) financing activities (20,459) (18,716) (20,459) (18,716)Net increase/(decrease) in funds held (6,658) 2,976 (280) (301)

oPeninG casH PositionBank 2,694 6,285 148 449Add: Cash on hand 68 64 – – Short term deposits 23,208 16,645 – –

23,276 16,709 – –Net cash held at balance date 25,970 22,994 148 449closinG casH PositionBank 1,122 2,694 (132) 148Add: Cash on hand 63 68 – – Short term deposits 18,127 23,208 – –

18,190 23,276 – –Net cash held at balance date 7 19,312 25,970 (132) 148Net increase/(decrease) in funds held (6,658) 2,976 (280) (301)


STATEmENTS OF CASH FLOWS/// FOR THE YEAR ENDED 1 AUGUST 2013


GrouP Parent

$’000 note 2013 2012 2013 2012

Reported surplus after taxation 18,669 21,020 20,877 18,789

add/(deduct) items classified as inVestinG or financinG actiVities (Gain)/loss on sale of plant and equipment 5 295 119 – –

Insurance proceeds for material damage – (2,507) – –

add/(deduct) non casH items Depreciation and amortisation 5 7,482 7,111 – –

Deferred taxation 13 (174) (244) – –

Revaluation of financial instruments – – – –

Share option expense 25 81 227 – –

add/(deduct) moVements in WorkinG caPital items Taxation payable (2,047) 487 – –

Receivables (183) 3,774 – –

Creditors and accruals (1,595) 485 (1) (2)

Inventories (710) (1,243) – –

Net cash flows from/(applied to) operating activities 21,818 29,229 20,876 18,787

RECONCILIATION OF SURpLUS AFTER TAXATION TO CASH FLOWS FROm OpERATING ACTIvITIES/// FOR THE YEAR ENDED 1 AUGUST 2013


12

Hallenstein Glasson Holdings Limited (“Company” or “Parent”) together with its subsidiaries (the “Group”) is a retailer of men’s and women’s clothing in New Zealand and Australia.

The Company is a limited liability company incorporated and domiciled in New Zealand. The address of its registered office is Level 3, 235-237 Broadway, Newmarket, Auckland.

The financial statements were approved for issue by the Board of directors on 25 September 2013.

1. summary of siGnificant accountinG PoliciesThese general purpose financial statements for the year ended 1 August 2013 have been prepared in accordance with the New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting standards (NZ IFRS) and other applicable New Zealand Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards (IFRS).

Basisofpreparationoffinancialstatements

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

The reporting currency used in the preparation of these financial statements is New Zealand dollars, rounded where necessary to the nearest thousand dollars.

entitiesreporting

The financial statements are the Consolidated Financial Statements of the Group comprising Hallenstein Glasson Holdings Limited and subsidiaries, together they are referred to in these financial statements as “the Group”. The Parent and its subsidiaries are designated as profit oriented entities for financial reporting purposes.

The financial statements of the Parent are for the Company as a separate legal entity.

statutorybase

Hallenstein Glasson Holdings Limited is a company registered under the Companies Act 1993 and is an issuer in terms of the Securities Act 1978. The Company is also listed on the New Zealand Stock Exchange (NZX).

The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993.

Historicalcostconvention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments).

criticalaccountingestimates,judgementsandassumptions

The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. There are no estimates or assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

1.1. PrinciPles of consolidation(a)subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Hallenstein Glasson Holdings Limited as at 1 August 2013 and the results of all subsidiaries for the period then ended.

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income.

NOTES TO THE ACCOUNTS/// FOR THE YEAR ENDED 1 AUGUST 2013

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(b)transactionsandnon-controllinginterests

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c)investments

Subsidiary companies are valued at cost less provision for impairment in the Parent financial statements.

1.2. seGment rePortinGOperating segments are reported in a manner consistent with the internal reporting provided to the Board of directors. The Board of directors are responsible for allocating resources and assessing performance of the operating segments and delegate that authority through the chief executive officer.

foreiGn currency translationFunctionalandpresentationcurrency

Items included in the financial statements of each of the Company’s operations are measured using the currency of the primary economic environment in which it operates (“the functional currency”). The financial statements are presented in New Zealand dollars, which is the Group’s functional and presentation currency.

transactionsandbalances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

1.3. reVenue recoGnitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services, excluding Goods and Services Tax, rebates and discounts and after eliminating sales within the Group.

Revenue is recognised as follows:

salesofgoods–retail

Sales of goods are recognised when a Group entity has delivered a product to the customer. Retail sales are usually in cash or by credit card. The recorded revenue is the gross amount of sale (excluding GST), including credit card fees payable for the transaction. Such fees are included in selling expenses.

interestincome

Interest income is recognised as earned.

rentalincome

Rental income from operating leases (net of any incentives) is recognised on a straight line basis over the lease term.

dividendincome

Dividend income is recognised when the right to receive a payment is established.

1.4. income taxThe income tax expense or revenue for the period is the tax payable or receivable on the current period’s taxable income based on the notional income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements and unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.



14

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in operations where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

1.5. leasesthegroupisthelessee

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease.

thegroupisthelessor

Assets leased to third parties under operating leases are included in property, plant and equipment in the Statement of Financial Position. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight line basis over the lease term.

1.6. imPairment of non-financial assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, for example planned store closure, withdrawal from a business segment, or assessment of loss making stores outside of development markets. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

1.7. casH and casH equiValentsCash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

1.8. trade receiVaBlesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables arise from the sales made to customers on credit.

Trade receivable balances are reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The movement in the amount of the provision is recognised in the Statement of Comprehensive Income.

Significant financial difficulties of the debtor, default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows.

1.9. inVentoriesInventories are stated at the lower of cost or net realisable value. Cost is determined using the weighted average method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses, excluding borrowing costs.

1.10. inVestments and otHer financial assetsLoans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance date which are classified as non-current assets. Loans and receivables are included in receivables in the Statement of Financial Position.

1.11. deriVatiVesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).


The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

Fairvaluehedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Statement of Comprehensive Income, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

cashflowhedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Comprehensive Income.

Amounts accumulated in equity are recycled in the Statement of Comprehensive Income in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Statement of Comprehensive Income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Statement of Comprehensive Income.

derivativesthatdonotqualifyforhedgeaccounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of these derivative instruments are recognised immediately in the Statement of Comprehensive Income.

1.12. fair Value estimationThe fair value of financial instruments traded in active markets (such as trading securities) is based on quoted market prices at balance date.

The fair value of derivatives that are not traded in an active market (for example, over the counter derivatives) is determined using appropriate valuation techniques. The fair value of forward exchange contracts, swaps and options are determined by mark to market valuations using market quoted information at the balance date.

Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance date.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values.

The only financial instruments held by the Group that are measured at fair value are over the counter derivatives. These derivatives have all been determined to be within level 2 of the fair value hierarchy as all significant inputs required to ascertain the fair value of these derivatives are observable (refer Note 4.1.3).

1.13. ProPerty, Plant and equiPmentLand and buildings are recorded at valuation and are revalued at least every three years based on an independent valuation by a member of the New Zealand Institute of Valuers. All other classes of assets are recorded at historical cost. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:

Buildings 67 yearsPlant and equipment 2 – 5 yearsFurniture, fittings and office equipment 5 – 10 years

The assets’ residual values and useful lives are reviewed and adjusted if appropriate at each balance date.



16

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the Statement of Comprehensive Income.

1.14. intanGiBle assetsSoftware costs have a finite useful life. Software costs are capitalised and written off over the estimated useful economic life of 3 to 10 years.

1.15. trade and otHer PayaBlesThese amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid. The amounts are unsecured and are usually paid within 60 days of recognition.

1.16. ProVisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

1.17. sHare caPitalOrdinary shares are classified as capital, net of treasury stock.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

1.18. treasury stockShares purchased on market under the executive share scheme are treated as treasury stock on acquisition at cost. On vesting to the employee, treasury stock shares are credited to equity and an employee loan is recorded initially at fair value and subsequently at amortised cost. Any gain or loss on disposal by the employee which accrues to the Company is taken directly against equity.

1.19. reserVesThe asset revaluation reserve records revaluations of property, net of tax.

The cash flow hedge reserve records the fair value of derivative financial instruments, net of tax that meet the hedge accounting criteria.

The share option reserve is used to record the accumulated value of unvested share rights arising from the executive share scheme which have been recognised in the Statement of Comprehensive Income.

1.20. deferred landlord contriButionsLandlord contributions to fit-out costs are capitalised as deferred contributions and amortised to the Statement of Comprehensive Income over the period of the lease.

1.21. emPloyee Benefitswagesandsalaries,annualleaveandsickleave

Liabilities for wages and salaries, including non monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

longserviceleave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash flows.


equitysettledshare-basedcompensation

Equity settled share-based compensation benefits are provided to employees in accordance with the Group’s executive share scheme. The fair value of share rights granted under the scheme are recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the share rights.

The fair value at grant date of the share rights is determined using an appropriate valuation model that takes into account the exercise price, the term of the share right, the vesting and performance criteria, the non-tradeable nature of the share right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the share right.

At each balance date, the Group revises its estimate of the number of share rights that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.

Upon the vesting of share rights, the balance of the share option reserve relating to the share rights is transferred to retained earnings.

1.22. diVidendsProvision is made for the amount of any dividend declared on or before the balance date but not distributed at balance date.

1.23. earninGs Per sHareBasic and diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for bonus elements in ordinary shares issued during the period.

1.24. Goods and serVices tax (Gst)The Statements of Comprehensive Income and Statements of Cash Flows have been prepared so that all components are stated exclusive of GST. All items in the Statement of Financial Position are stated net of GST, with the exception of receivables and payables, which include GST invoiced.

1.25. statements of casH floWsThe following are the definitions of the terms used in the Statements of Cash Flows:

(I.) Cash comprises cash and cash equivalents.

(II.) Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment and investments.

(III.) Financing activities are those activities which result in changes in the size and composition of the capital structure of the Group. This includes both equity and debt not falling within the definition of cash. Dividends paid are included in financing activities.

(IV.) Operating activities include all transactions and other events that are not investing or financing activities.

2. standards, amendments and interPretations to existinG standardschangestoaccountingpoliciesthathavebeenadoptedfornewaccountingstandardsandnewinterpretationsinthepreparationandpresentationofthefinancialstatements:

There have been no significant changes in accounting policies during the year.

newaccountingstandards,amendmentsandinterpretationstoexistingstandardsthatarenotyeteffectiveandhavenotbeenearlyadoptedbythegroup,are:

nZiFrs9Financialinstruments (effective for annual reporting periods beginning on or after 1 January 2015)

NZ IFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption.

When adopted there will be no impact on the Group’s accounting for financial liabilities as the derecognition rules have been transferred from NZ IAS 39 Financial Instruments: Recognition and Measurement and have not been changed.

nZiFrs13Fairvaluemeasurement (effective 1 January 2013)

NZ IFRS 13 explains how to measure fair value and aims to enhance fair value disclosures. The new rules will not have a significant impact on any of the amounts recognised in the financial statements as the Group does not need to change any of its current measurement techniques as a result of the new guidance.

3. seGment informationdescriptionofsegments

The Group has determined the operating segments based on the reports reviewed by the senior management team and Board of Directors that are used to make strategic decisions.



18

The senior management team considers the business from both a product and geographic perspective as follows:

– Hallenstein Bros Limited (New Zealand)– Glassons Limited (New Zealand)– Glassons Australia Limited (Australia)– Storm (Retail 161 Limited) (New Zealand)– Hallenstein Properties Limited (New Zealand)

The reportable segments derive their revenues primarily from the retail sale of clothing. Sales between segments are carried out at arm’s length. The revenues from external parties reported to the senior management team is measured in a manner consistent with that in the statements of comprehensive income. There are no significant revenues derived from a single external customer.

seGment results

Fortheperiodended1august2013 Glassons

neW ZealandGlassons australia Hallensteins storm ProPerty Parent total GrouP$’000

income statementTotal sales revenue from external customers 88,246 40,942 81,612 9,317 – – 220,117

Cost of sales (38,683) (14,887) (32,719) (2,770) – – (89,059)

Finance income 192 14 689 8 – 7 910

Depreciation and software amortisation 2,921 1,894 2,092 338 237 – 7,482

Net profit before tax 11,626 (1,609) 12,717 2,161 1,086 – 25,981

Tax (3,266) 448 (3,580) (610) (304) – (7,312)

Net profit after tax 8,360 (1,161) 9,137 1,551 782 – 18,669

Balance sHeetCurrent assets 10,541 4,020 27,977 1,103 29 412 44,082

Non current assets 12,937 6,189 6,689 1,164 14,247 - 41,226

Current liabilities 6,680 2,233 8,320 887 221 32 18,373

Purchase of property, plant and equipment and intangibles 3,555 1,710 2,664 516 1 – 8,446

Fortheperiodended1august2012 Glassons

neW ZealandGlassons australia Hallensteins storm ProPerty Parent total GrouP$’000

income statementTotal sales revenue from external customers 91,111 39,480 77,480 7,510 – – 215,581

Cost of sales (40,038) (14,077) (32,733) (2,345) – – (89,193)

Finance income 206 49 584 15 – 13 867

Depreciation and software amortisation 2,737 1,581 2,258 356 179 – 7,111

Net profit before tax 14,872 590 10,811 1,845 1,183 – 29,301

Tax (4,186) (193) (3,049) (522) (331) – (8,281)

Net profit after tax 10,686 397 7,762 1,323 852 – 21,020

Balance sHeetCurrent assets 14,225 5,242 28,603 880 29 148 49,127

Non current assets 11,641 6,736 6,284 976 13,814 – 39,451

Current liabilities 8,718 3,463 8,556 951 292 34 22,014

Purchase of property, plant and equipment and intangibles 4,355 3,455 1,879 303 264 – 10,256


4. financial risk manaGement

4.1. financial risk factorsThe Group’s activities expose it to various financial risks including liquidity risk, credit risk, and market risk (including currency risk and cash flow interest rate risk). The Group’s risk management strategy is to minimise adverse effects on comprehensive income. Derivative financial instruments are used to hedge currency risk.

4.1.1.liquidityrisk

Liquidity risk is the risk that the Group will be unable to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group manages liquidity risk by maintaining adequate reserves, and by regularly monitoring cash flow.

At balance date, the Group had $19.312 million (2012: $25.970 million) in cash reserves and accordingly, management consider liquidity risk to be relatively low.

The table below analyses the Group’s financial liabilities and gross-settled derivatives into relevant maturity groupings based on the remaining period from the Statement of Financial Position to the contractual maturity date. The cash flow hedge “outflow” amounts disclosed in the table are the contractual undiscounted cash flows liable for payment by the Group in relation to all forward foreign exchange contracts in place at balance date. The cash flow hedge “inflow” amounts represent the corresponding inflow of foreign currency back to the Group as a result of the gross settlement on those contracts, converted using the spot rate at balance date. The carrying value shown is the net amount of derivative financial liabilities and assets as shown in the Statements of Financial Position.

Trade payables are shown at carrying value in the table. No discounting has been applied as the impact of discounting is not significant.

There are no financial derivative liabilities or assets held by the Parent. All trade payables owed by the Parent are due in less than three months.

GrouP asat1august2013 less tHan

3 montHs 3-12 montHs totalcarryinG

Value$’000

Trade and other payables 14,138 – 14,138 14,138

Employee benefits 3,081 – 3,081 3,081

17,219 – 17,219 17,219

Forward foreign exchange contracts

Cash flow hedges:

– Outflow (13,276) – (13,276) (13,276)

– Inflow 13,427 – 13,427 13,427

– Net 151 – 151 151

asat1august2012 less tHan 3 montHs 3-12 montHs total

carryinG Value$’000

Trade and other payables 16,071 – 16,071 16,071

Employee benefits 2,743 – 2,743 2,743

18,814 – 18,814 18,814

Forward foreign exchange contracts

Cash flow hedges:

- Outflow (15,388) (4,999) (20,387) (20,387)

- Inflow 15,417 4,933 20,350 20,350

- Net 29 (66) (37) (37)



20

4.1.2.creditrisk

Credit risk is the risk of the failure of a debtor or counterparty to honour its contractual obligations resulting in financial loss to the Group. The Group incurs credit risk from trade receivables and transactions with financial institutions. The Group places its cash, short-term investments and derivative financial instruments with high credit quality financial institutions. Retail sales are predominantly settled in cash or by using major credit cards. 1% (2012: 2%) of sales give rise to trade receivables.

Concentration of credit risk with respect to debtors is limited due to the large number of customers included in the Group’s customer base.

The Group does not require collateral or other security to support financial instruments with credit risk.

4.1.3.marketrisk

ForeignexchangeriskThe Group is exposed to foreign exchange risk arising from currency exposure predominantly with the US dollar with the purchase of inventory from overseas suppliers.

The Board has established a Treasury Risk Policy to manage the foreign exchange risk. The policy is reviewed on a regular basis and management report monthly to the Board to confirm policy is adhered to. All committed foreign currency requirements are fully hedged, and approximately 18% (2012: 30%) of anticipated foreign currency requirements are hedged on a rolling twelve month basis.

The Group uses forward exchange contracts with major retail banks only to hedge its foreign exchange risk arising from future purchases.

Forwardexchangecontracts–cashflowhedgesThese contracts are used for hedging committed or highly probable forecast purchases of inventory. The contracts are timed to mature during the month the inventory is shipped and the liability settled. The cash flows are expected to occur at various dates within one year from balance date.

When forward exchange contracts have been designated and tested as an effective hedge the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. These gains or losses will be realised to the Statement of Comprehensive Income at various dates over the following year as the hedged risk crystallises.

At balance date the Group had entered into forward exchange contracts to sell the equivalent of NZ$13,276,179 (2012: $20,387,116), primarily in US dollars. At balance date these contracts are represented by assets of $194,905 (2012: $19,010) and liabilities of $Nil (2012: $Nil). When foreign exchange contracts are not designated and tested as an effective hedge, the gain or loss on the foreign exchange contract is recognised in the Statement of Comprehensive Income. At balance date there are no such contracts in place (2012: $Nil).

interestrateriskThe Group has no interest bearing liabilities. Exposure to interest rate risk arises only from the impact on income from operating cash flows as a result of interest bearing assets, such as cash deposits.

sensitivityanalysisBased on historical movements and volatilities and managements knowledge and experience, management believes that the following movements are “reasonably possible” over a 12 month period:

• Proportional foreign exchange movement of -10% (depreciation of NZD) and +10% (appreciation of NZD) against the USD, from the year end rate of 0.7958 (2012: 0.8111).

• A parallel shift of +1%/-1% in the market interest rates from the year end deposit rate of 4.10% (2012: 4.10%).

If these movements were to occur, the post tax impact on consolidated profit and loss and equity for each category of financial asset is presented on the following page:


asat1august2013 carryinG amount

interest rate foreiGn excHanGe rate

-1% +1% -10% +10%

$’000 Profit equity Profit equity Profit equity Profit equity

financial assetsCash and cash equivalents 19,312 (193) (193) 193 193 – – – –

Accounts receivable 1,138 – – – – – – – –

Advances to employees 544 – – – – – – – –

Derivatives designated as cash flow hedges (forward foreign exchange contracts) 195 – – – – – (98) – 80

financial liaBilitiesTrade and other payables 14,138 – – – – – – – –

Employee benefits 3,081 – – – – – – – –

Derivatives designated as cash flow hedges (forward foreign exchange contracts) – – – – – – – – –

Total increase/decrease (193) (193) 193 193 – (98) – 80

asat1august2012 carryinG amount

interest rate foreiGn excHanGe rate

-1% +1% -10% +10%

$’000 Profit equity Profit equity Profit equity Profit equity

financial assetsCash and cash equivalents 25,970 (260) (260) 260 260 – – – –

Accounts receivable 864 – – – – – – – –

Derivatives designated as cash flow hedges (forward foreign exchange contracts) 19 – – – – – (137) – 112

financial liaBilitiesTrade and other payables 16,071 – – – – – – – –

Employee benefits 2,743 – – – – – – – –

Derivatives designated as cash flow hedges (forward foreign exchange contracts) – – – – – – – – –

Total increase/decrease (260) (260) 260 260 – (137) – 112

The Parent is not exposed to any interest rate or foreign exchange risk.



22

financial instruments By cateGoryThe accounting policies for financial instruments have been applied to the line items below:

asat1august2013 GrouP Parent

$’000loans and

receiVaBlesderiVatiVes used

for HedGinG

totalloans and


for HedGinG

total

assets as Per statements of financial PositionCash and cash equivalents 19,312 – 19,312 (132) – (132)

Trade and other receivables 1,138 – 1,138 – – –

Advances to employees 544 – 544 544 544

Due from related parties – – – 1,742 – 1,742

Derivative financial instruments – 195 195 – – –

Total 20,994 195 21,189 2,154 – 2,154

$’000trade and

otHer PayaBlesderiVatiVes used

for HedGinG

totaltrade and


for HedGinG

total

liaBilities as Per statements of financial PositionTrade and other payables 17,219 – 17,219 33 – 33

Derivative financial instruments – – – – – –

Total 17,219 – 17,219 33 – 33

asat1august2012 GrouP Parent

$’000loans and


for HedGinG

totalloans and


for HedGinG

total

assets as Per statements of financial PositionCash and cash equivalents 25,970 – 25,970 148 – 148

Trade and other receivables 864 – 864 – – –

Due from related parties – – – 814 – 814

Derivative financial instruments – 19 19 – – –

Total 26,834 19 26,853 962 – 962

$’000trade and


for HedGinG

totaltrade and


for HedGinG

total

liaBilities as Per statements of financial PositionTrade and other payables 18,814 – 18,814 34 – 34

Derivative financial instruments – – – – – –

Total 18,814 – 18,814 34 – 34

4.1.4. caPital risk manaGement The Group’s objectives when managing capital are to maximise the value of shareholder equity and ensure that the Group continues to safeguard its ability to continue as a going concern. Group capital consists of share capital, other reserves and retained earnings. In order to meet these objectives the Group may adjust the amount of dividend payment made to shareholders. There are no specific banking or other arrangements which require that the Group maintain specific equity levels.


5. income and exPensesProfit before income tax includes the following specific income and expenses:

GrouP Parent

$’000 2013 2012 2013 2012

incomeRental income 155 167 – –

Interest on short term deposits 856 803 7 13

Interest received on trade debtors 54 64 – –

Interest on intercompany balances – – 37 14

Total finance income 910 867 44 27

Dividends from subsidiaries – – 20,877 18,789

Intercompany charges – – 718 625

exPensesBad debts written off (5) (18) – –

Donations 104 271 – –

Occupancy costs 23,431 22,588 – –

Amounts paid to auditors

Statutory audit 112 109 16 16

Directors’ fees 363 304 363 304

Wages, salaries and other short term benefits 41,203 39,077 – –

Depreciation – freehold buildings 201 201 – –

Depreciation – furniture and fittings 5,298 5,134 – –

Depreciation – motor vehicles, plant and equipment 1,572 1,376 – –

Total depreciation 7,071 6,711 – –

Amortisation of software 411 400 – –

Total depreciation and amortisation 7,482 7,111 –

Loss on sale of property, plant and equipment 295 119 – –

6. income tax exPense GrouP Parent

$’000 2013 2012 2013 2012

income tax exPenseThe tax expense comprises:

Current tax expense 7,486 8,525 – –

Deferred tax expense

– Future tax benefit current year (174) (244) – –

Total income tax expense 7,312 8,281 – –

reconciliaton of income tax exPense to tax rate aPPlicaBle to ProfitsProfit before income tax expense 25,981 29,301 20,877 18,789

Tax at 28% (2012: 28%) 7,274 8,204 5,846 5,261

Tax effect of:

– Income not subject to tax – – (5,846) (5,261)

– Expenses not deductible for tax 38 77 – –

– Release deferred tax for reduction in tax rate – – – –

Total income tax expense 7,312 8,281 – –

The effective tax rate for the year was 28% (2012: 28%).

The Group has no tax losses (2012: Nil) and no unrecognised temporary differences (2012: Nil).



24

7. casH and casH equiValents GrouP Parent

$’000 2013 2012 2013 2012

Cash at bank 1,122 2,694 (132) 148

Short term deposits 18,127 23,208 – –

Cash on hand 63 68 – –

19,312 25,970 (132) 148

The carrying amount of cash equivalents equals the fair value.

8. trade and otHer receiVaBles GrouP Parent

$’000 2013 2012 2013 2012

currentTrade receivables 568 667 – –

Provision for doubtful debts (63) (70) – –

Net trade receivables 505 597 – –

Other receivables 633 267 – –

1,138 864 – –

Prepayments 2,669 2,760 – –

Due from subsidiaries – – 1,742 814

Total receivables and prepayments 3,807 3,624 1,742 814

As at 1 August 2013, trade receivables of $115,668 (2012: $133,661) were past due but considered fully collectible and therefore not impaired. These relate to accounts for which there is an active and ongoing payment history. The ageing analysis of receivables is shown below:

GrouP Parent

$’000 2013 2012 2013 2012

montHs Past dueCurrent 453 533 – –

1-2 47 66 – –

3-5 40 23 – –

5+ 28 45 – –

568 667 – –

Amounts due from subsidiaries are repayable on demand. At balance date the Parent had no intention to seek repayment in the foreseeable future.

The effective rate charged on overdue trade receivables is 18% (2012: 18%) and is set by management and therefore not subject to interest rate sensitivity.

The effective rate charged on intercompany balances is 2.8% (2012: 3.1%) and is set by management and therefore not subject to interest rate sensitivity.

The carrying amount of trade receivables is equivalent to their fair value.


9. inVentories GrouP Parent

$’000 2013 2012 2013 2012

Finished goods 21,191 20,193 – –

Inventory adjustments (967) (679) – –

Net inventories 20,224 19,514 – –

Inventory adjustments are provided at year end for stock obsolescence within cost of sales in the Statement of Comprehensive Income.

10. trade and otHer PayaBles GrouP Parent

$’000 2013 2012 2013 2012

Trade payables 6,836 6,632 33 34

Other payables 7,302 9,439 – –

Total trade and other payables 14,138 16,071 33 34

Trade payables are paid within 30 days of invoice date or the 20th of the month following purchase. The carrying amount of trade payables is equivalent to their fair value.

11. emPloyee BenefitsEmployee benefits include provisions for annual leave, long service leave, sick leave and bonuses. All benefits are short term in nature.

GrouP Parent

$’000 2013 2012 2013 2012

Holiday pay accrual and other benefits 3,081 2,743 – –

12. tax PayaBle GrouP Parent

$’000 2013 2012 2013 2012

Balance at beginning of period 3,200 2,713 – –

Current tax 7,486 8,525 – –

Tax paid (9,454) (7,968) – –

Foreign investor tax credit (78) (70) – –

Balance at end of period 1,154 3,200 – –



26

13. deferred tax GrouP Parent

$’000 2013 2012 2013 2012

amounts recoGnised in Profit or lossDepreciation 1,649 1,399 – –

Amortisation 279 280 – –

Provisions and accruals 828 903 – –

2,756 2,582 – –

amounts recoGnised directly in equityAsset revaluation reserve (2,281) (1,985) – –

Cash flow hedges (55) (5) – –

420 592 – –

moVementsBalance at beginning of year 592 741 – –

Credited (charged) to the income statements 174 244 – –

Credited (charged) to equity (346) (393) – –

Balance at end of the year 420 592 – –

timinG of usaGeWithin one year 1,052 1,178 – –

Greater than one year (632) (586) – –

420 592 – –

14. imPutation credits GrouP and Parent

$’000 2013 2012

Imputation credits available for subsequent periods 12,770 13,632

15. contriButed equity GrouP and Parent

2013 Shares

2012 Shares

2013 $’000

2012 $’000

Balance at beginning of period 59,063,328 59,090,428 27,672 27,599

Purchase of treasury stock (137,500) (27,100) (699) (99)

Sale of treasury stock 186,285 – 953 –

Dividends – – 164 172

Transfer to employee advances 347,632 – 775 –

(Gain)/loss on sale of treasury stock transferred to retained earnings – – (367) –

Balance at end of period 59,459,745 59,063,328 28,498 27,672

Representing:

Share capital 59,649,061 59,649,061 29,279 29,279

Treasury stock (net of dividends) (189,316) (585,733) (781) (1,607)

59,459,745 59,063,328 28,498 27,672

All shares are fully paid and rank equally.


16. executiVe sHare scHemeThe Company operates an employee share scheme for certain senior executives to purchase ordinary shares in the Company. The Company provides the employees with limited recourse loans on an interest free basis to assist employees’ participation. The loans are applied to purchase shares on market and the shares are treated as treasury stock. The loan amount is the total market value of the shares plus any commission applicable on the date of purchase. Any dividends payable on the shares are applied towards the repayment of the advance.

The scheme holds 189,316 fully allocated shares which represent 0.32% of the total shares on issue (2012: 585,733 shares which represented 0.98% of the shares on issue).

Shares purchased under the scheme are held by two Directors as custodians and vest three years from the date of purchase. In the event the employee leaves the Company during the vesting period, the loan is repaid by selling the shares on market. Any gain or loss arising from the sale of shares is included in equity. Refer to note 15 for further detail on treasury stock.

GrouP and Parent

2013 2012

Number of shares

Purchase/sale price

Number of shares

Purchase/sale price

Balance at beginning of financial year 585,733 – 558,633 –

Purchased on market during the year 137,500 5.09 27,100 3.67

Forfeited during the year (186,285) 5.12 – –

Exercised during the year (347,632) – – –

Balance at end of financial year 189,316 585,733

17. diVidends GrouP and Parent

2013 Cents per

share

2012 Cents per

share

2013

$’000

2012

$’000

Final dividend for period ended 1 August 2012 19.00 – 11,333 –

Interim dividend for period ended 1 August 2013 16.00 – 9,544 –

Final dividend for period ended 1 August 2011 – 17.00 – 10,140

Interim dividend for period ended 1 August 2012 – 14.50 – 8,649

Total 35.00 31.50 20,877 18,789

All dividends paid were fully imputed. Supplementary dividends of $78,213 (2012: $69,642) were paid to shareholders not resident in New Zealand for tax purposes for which the Group received a foreign investor tax credit.

18. earninGs Per sHare

BasicBasic earnings per share is calculated by dividing the profit after tax of the Group by the weighted average number of ordinary shares outstanding during the year.

GrouP and Parent

2013 2012

Profit after tax ($’000) 18,669 21,020

Weighted average number of ordinary shares outstanding (000’s) 59,649 59,649

Basic earnings per share (cents) 31.30 35.24

Diluted earnings per share (cents) 31.30 35.24

dilutedDiluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. There are no options convertible into shares as at 1 August 2013 (2012: Nil).



28

19. lease commitmentsThe Group leases various retail outlets under non-cancellable operating lease agreements. Leases reflect normal commercial arrangements with varying terms, escalation clauses and renewal rights.

GrouP Parent

$’000 2013 2012 2013 2012

At balance date the aggregate lease commitment was as follows:

Due within one year 19,573 18,805 – –

One to two years 17,250 14,943 – –

Two to five years 28,167 26,022 – –

Later than five years 6,481 2,626 – –

Total operating lease commitment 71,471 62,396 – –

20. caPital exPenditure commitments GrouP Parent

$’000 2013 2012 2013 2012

Commitments in relation to store fitouts 2,102 1,400 – –

21. continGenciesThere were no contingent liabilities as at 1 August 2013 (2012: Nil).


22. ProPerty, Plant and equiPmentThe Parent holds no property, plant and equipment.

Land and buildings were revalued to fair value on 1 August 2013. Valuations were made on the basis of recent market transactions on arm’s length terms. The valuations assume no major economic downturn after the date of valuation and that the properties continue to be managed and maintained in a professional manner.

The revaluation surplus net of applicable deferred income taxes was credited to the “asset revaluation reserve” in shareholders’ equity.

The values were determined by independent valuers Colliers International and Telfer Young (Hawkes Bay) Ltd.

$’000land

ValuationBuildinGs

at Valuationfixtures

& fittinGsPlant &

equiPment

total

costOpening balance 2 August 2011 8,569 10,407 40,304 9,842 69,122

Additions – – 7,688 2,088 9,776

Revaluations – – – – –

Disposals – – (7,610) (1,584) (9,194)

Closing balance 1 August 2012 8,569 10,407 40,382 10,346 69,704

Revaluations 417 656 – – 1,073

Additions – – 6,156 2,016 8,172

Disposals – – (4,506) (1,892) (6,398)

Closing balance 1 August 2013 8,986 11,063 42,032 10,470 72,551

dePreciation and imPairmentOpening balance 2 August 2011 – – 26,840 6,891 33,731

Revaluations/adjustments – – – – –

Depreciation charge – 201 5,134 1,376 6,711

Disposals – – (7,421) (1,442) (8,863)

Closing balance 1 August 2012 – 201 24,553 6,825 31,579

Revaluations/adjustments – (402) – – (402)

Depreciation charge – 201 5,298 1,572 7,071

Disposals – – (4,150) (1,756) (5,906)

Closing balance 1 August 2013 – – 25,701 6,641 32,342

carryinG amountsAt 2 August 2011 8,569 10,407 13,464 2,951 35,391

At 1 August 2012 8,569 10,206 15,829 3,521 38,125

At 1 August 2013 8,986 11,063 16,331 3,829 40,209

If land and buildings were stated on an historical cost basis, the amounts would be as follows:

$’000 2013 2012

Cost 17,974 17,974

Accumulated depreciation (1,414) (1,211)

Net book amount 16,560 16,763



30

23. intanGiBle assets$’000

costOpening balance 2 August 2011 3,088

Additions 480

Disposals (29)

Closing balance 1 August 2012 3,539

Additions 274

Disposals (170)


dePreciation and imPairmentOpening balance 2 August 2011 2,434

Amortisation for the year 400

Disposals (29)


Amortisation for the year 411

Disposals (170)


carryinG amountsAt 2 August 2011 654

At 1 August 2012 734

At 1 August 2013 597

The Parent holds no intangible assets.

The useful life of software is estimated to be 5 years (2012: 5 years).

24. inVestments in suBsidiariesThe Parent’s investment in subsidiaries comprises shares at cost less provision for impairment. The assets and liabilities attributed to the Hallenstein Glasson Holdings Limited Group are owned by the following subsidiaries:

PrinciPal suBsidiaries interest Held PrinciPal actiVities2013 2012

Hallenstein Bros Limited 100% 100% Retail of menswear in New Zealand

Glassons Limited 100% 100% Retail of womenswear in New Zealand

Glassons Australia Limited 100% 100% Retail of womenswear in Australia

Retail 161 Limited 100% 100% Retail of womenswear in New Zealand

Hallenstein Properties Limited 100% 100% Property ownership in New Zealand

Retail 161 Australia Limited 100% Retail of womenswear in Australia

All subsidiaries have a balance date of 1 August.


25. related Party transactionsDuring the period the Company advanced and repaid loans to its subsidiaries by way of internal current accounts. In presenting the financial statements of the Group, the effect of transactions and balances between fellow subsidiaries and those with the Parent have been eliminated. All transactions with related parties were in the normal course of business and provided on commercial terms.

The Group undertook transactions with the related interests of the majority shareholder as detailed below:

Related party transactions $’000 2013 2012

t c Glasson Rent on retail premises based on independent valuation 1,049 946

Material transactions between the Company and its subsidiaries were as follows:

Transaction type $’000 Related party (subsidiary companies) 2013 2012

diVidends receiVed Glassons LimitedHallenstein Bros LimitedHallenstein Properties LimitedRetail 161 Limited

9,6618,923

8221,471

9,2655,6792,896

949

20,877 18,789

intercomPany cHarGes Glassons LimitedHallenstein Bros LimitedHallenstein Properties LimitedGlassons Australia LimitedRetail 161 Limited

269269

727236

250250

6263

–

718 625

The Company has intercompany advances with subsidiaries as follows:

$’000 2013 2012

Glassons Limited 9 23

Hallenstein Bros Limited 1,517 686

Hallenstein Properties Limited 180 105

Retail 161 Limited 36 –

Glassons Australia Limited – –

1,742 814



32

The following directors received directors’ fees and dividends in relation to their personally held shares as follows:

Fees and dividends directors’ fees diVidends$’000 2013 2012 2013 2012

Mr T C Glasson 68 59 4,183 3,764

Mr W J Bell 97 84 7 6

Ms G Shearer (Appointed January 2013) 45 – – –

Mr H Bretherton (Resigned December 2011) – 25 – 8

Mr M Donovan 68 59 4 3

Mr G Popplewell – – 71 64

Ms D Humphries (Resigned 31 October 2012) – – – 46

Mr M Ford 85 78 – –

Key management compensation was as follows:

GrouP

$’000 2013 2012

Short term employee benefits 2,570 2,360

Share Scheme Benefit 81 227

The Parent did not pay any salaries or any other employee benefits (2012: Nil).

The Company operates an employee share scheme for certain senior executives which is outlined in Note 16.

In accordance with NZ IFRS 2 this scheme is an equity-settled scheme. The valuation was derived using the Black Scholes Pricing Model that takes into account the equity value, the expected volatility of the Group’s equity returns, the risk free interest rate and the vesting period.

The model inputs for shares issued during the year ended 1 August 2013 included a share issue price of $5.09 (2012: $3.67) an expected price volatility of 30% (2012: 30%), a risk free interest rate of 4.0% (2012: 4.0%) and an estimated three year vesting period.

26. cHristcHurcH eartHquakeAs a result of the September 2010, February 2011 and June 2011 Canterbury earthquakes the Group sustained property and inventory damage and increased operating costs. The Group has material damage and business interruption insurance policies to compensate the Group for financial loss as a result of the earthquakes and has lodged insurance claims with its insurers for these events. All outstanding amounts have now been received.

GrouP Parent

$’000 2013 2012 2013 2012

Insurance income for material damage – 1,532 – –

Less inventory and property plant and equipment written down – – – –

– 1,532 – –

Insurance income for business interruption – 417 – –

– 1,949 – –

27. eVents suBsequent to Balance dateSubsequent to year end, the Board has resolved to pay a final dividend of 17.5 cents (2012: 19 cents) per share (fully imputed). The dividend will be paid on 6 December 2013 to all shareholders on the Company’s register as at 5:00pm, 29 November 2013.


Board of directorsDirectors of the Company in office at the end of the year or who ceased to hold office during the year:

director qualifications/exPerience sPecial resPonsiBilities

Warren James Bell M Com CA. Appointed December 1986. Mr Bell holds appointments on a number of Boards of public and private companies, and is a professional director.

Chairman of directors Non-executive director

Michael John Donovan ANZIM. Appointed May 1990. Founder and Director of Wild Pair and Lippy retail stores.

Non-executive director Independent director

Timothy Charles Glasson Founder of Glassons womenswear retail chain. Appointed November 1985 on merger with Hallensteins.

Non-executive director

Graeme James Popplewell B Com CA. Appointed March 1985. Chief executive officer

Diane Helen Humphries (Resigned 31 October 2012) Managing director Glassons Limited

Malcolm Ford Appointed June 2010. Background includes 20 years with Pacific Brands in Australia and has experience in brand management, direct sourcing, wholesale and retail.


Glenys Shearer Appointed January 2013. Based in Australia Ms Shearer has over 30 years of retail experience mainly with The Just Group. She brings experience in brand development, financial management and marketing in multi site retail operations.


PrinciPal actiVities of tHe GrouPHallenstein Glasson Holdings Limited is a non-trading Holding Company. The principal trading subsidiaries are Glassons Limited, Glassons Australia Limited (involved in the retail of women’s apparel), Retail 161 Limited, Retail 161 Australia Limited (trading as Storm), and Hallenstein Bros Limited (retail of men’s and boys’ apparel). The subsidiaries are 100% owned by Hallenstein Glasson Holdings Limited.

reVieW of oPerations

(a) consolidated results for tHe year ended 1 auGust 2013

$’000 2013 2012

Operating revenue 220,117 215,581

Profit before income tax 25,981 29,301

Income tax (7,312) (8,281)

Profit for the year 18,669 21,020

(B) diVidendAn interim dividend of 16.0 cents per share together with a supplementary dividend of 2.8235 cents per share to non-resident shareholders was paid on 19 April 2013. Subsequent to balance date the directors have declared a final dividend of 17.5 cents per share payable 6 December 2013. Non-resident shareholders of the Company will also receive a supplementary dividend of 3.0882 cents per share. Dividends are fully imputed to New Zealand resident shareholders.

GENERAL DISCLOSURES

Hallenstein Glasson Holdings ltd || 2013 an

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